JUDGMENT : The 1st petitioner in all these petitions is ‘RCI Industries and Technologies Ltd’ (RCI Ltd.), a company having its registered office in Delhi. The petitioners 2 and 3 in these cases are the Managing Director and Director respectively, of the 1st accused company. They have preferred these petitions under Section 482 of the Code of Criminal Procedure (“Code” for the sake of brevity) challenging Annexure-A1 complaint filed by the South Indian Bank Ltd. (SIB Ltd.), Department of Trade Finance Centralised Processing Centre, Ernakulam before the Judicial Magistrate of the First Class-III, Ernakulam under Section 28(1) of the Payment and Settlement Systems Act, 2007 (“the PSS Act, 2007” for brevity). 2. As the legal issues and contentions raised in all these petitions are identical, the assertions and contentions in Crl. M.C. No.2555 of 2022 shall be adverted to, for the disposal of these petitions. 3. The allegations in the complaint in brief are as under: (a) RCI Ltd. is a company engaged in industrial material manufacturing. The accused Nos.2 and 3 are the Managing Director and Director, respectively, and they are the persons in charge of and are responsible to the 1st accused company for the day-to-day conduct of its business. (b) The SIB Ltd. has provided Trade Receivables Discounting/Factoring Facilities to the 1st accused company through M/s. Mynd Solutions Pvt. Ltd (M1xchange). The M1xchange operates the Trade Receivable Discounting System (TReDS) platform as per the TReDS guidelines issued by the Reserve Bank of India (RBI). (c) For the purpose of availing the Trade Receivables Discounting/Factoring Facilities offered by the SIB Ltd, the 1st accused opted for National Automated Clearing House mandate and accordingly issued standing instructions to the bankers of the 1st accused, namely, the Union Bank of India (UBI) for a maximum amount of 100 lakhs per transaction (with payment frequency ‘as and when presented’) towards the discharge of the liability in respect of the aforementioned facility availed from the bank account of the RBI Ltd. (d) The complainant states that the Electronic Funds Transfer initiated by the 1st accused in respect of separate factoring units could not be executed for want of funds in the account maintained by the 1st accused company. It is stated that the intimation of such dishonor of Electronic Funds Transfer was received by the SIB Ltd, as per intimation dated 25.09.2019 issued by M1xchange. It is stated that the intimation of such dishonor of Electronic Funds Transfer was received by the SIB Ltd, as per intimation dated 25.09.2019 issued by M1xchange. (e) The accused were bound to pay an amount of Rs.1,50,84,892/- to the complainant towards the dishonour of the above three Electronic Fund Transfer transactions. (f) The accused availed Trade Receivables Discounting/Factoring Facilities under TReDS platform after making the complainant believe that the transaction towards the discharge of liability in respect of the aforementioned facility will be honored on presentment. (g) Within 30 days of the receipt of information from M1xchange regarding the dishonor, the complainant issued a notice through their lawyer on 04.10.2019 calling upon the accused to effect payment within 15 days. Though notice was accepted, they have not effected payment nor issued any reply. (h) Within the statutory period, the complaint was lodged before the jurisdictional Magistrate contending that the credit and debit transactions with respect to the Electronic Fund Transfer in the above case had taken place at the office of the complainant at Market Road, Ernakulam. 4. Sri.S. Sreekumar, the learned senior counsel appearing for the petitioners as instructed by Sri. Nandagopal S. Kurup, the learned counsel, contended that the complaint was lodged without complying with the statutory mandate. It is argued that the cognizance was taken by the learned Magistrate without conducting a proper enquiry as contemplated under Section 202 of the Cr.P.C. It is further submitted that under Section 25(1) of the PSS Act, the beneficiary will have to make a demand for the payment of the said amount of money by giving a notice in writing to the person initiating the Electronic Funds Transfer within 30 days of the receipt of the information by him from the Bank concerned regarding the dishonour of the Electronic Fund Transfer. According to the learned counsel, as the 1st accused company had opted for the National Automated Clearing House mandate and had issued standing instructions to the UBI - the banker of the 1st accused, the alleged intimation of dishonor of Electronic Fund Transfer as provided under Section 25(1)(c) of the PSS Act, shall have to come from the Union Bank of India. In the case on hand, the admitted case of the complainant is that the alleged intimation as regards the dishonor of cheques was issued by M1xchange, which under no circumstances can be regarded as a ‘Bank’ as defined under Section 2(1)(a) of the PSS Act. It is further submitted that the accused had entered into a master buyer agreement with M1xchange, which hosts the TReDS platform. Clause 17.1 of Annexure-A4 provides that the jurisdictional court to initiate any legal action shall be the courts situated in Delhi. In such circumstances, courts in Ernakulam will not have any jurisdiction. It is further submitted that in order to make the accused Nos.2 and 3 vicariously liable for the company, there has to be a specific averment in accordance with Section 27 of the Act. In the case on hand, the allegation in the complaint falls way short of the requirement. It is further submitted that the current account maintained by the 1st petitioner was under attachment by the GST authorities from 22.07.2019, and hence no transaction could be carried out. According to the learned counsel, the dishonor of the Electronic Fund Transfer was not wilful, and the same occurred due to beyond the control of the petitioner. 5. In response, Sri. K.P Satheesan, the learned senior counsel appearing for SIB Ltd. as instructed by Sri. P.A. Augustine, the learned counsel, submitted that the contentions raised by the petitioners are meritless. It is submitted that Annexure-A3 agreement relied upon by the petitionerS to oust the jurisdiction of the courts in Ernakulam cannot be relied upon as the same is an agreement entered into between M1xchange and the 1st petitioner. The bank is not a party to the agreement. Insofar as the dishonor of the instrument is concerned, the provisions of the Payment and Settlement Systems Act, 2007 would prevail. As the dishonor of the Electronic Fund Transfer had taken place within the jurisdiction of the learned Magistrate, the said court would have ample jurisdiction to take cognizance of the offence. Insofar as the grievance with regard to non-compliance of Section 202 of the Cr.P.C is concerned, it is submitted that no materials have been placed before this Court to substantiate the same. Placing reliance on the law laid down in Sunil Todi and Others v State of Gujarat, 2022(1) KHC 35 , it is submitted that the said assertion cannot be sustained. Placing reliance on the law laid down in Sunil Todi and Others v State of Gujarat, 2022(1) KHC 35 , it is submitted that the said assertion cannot be sustained. Referring to the complaint, it is submitted that specific averment has been made that the accused Nos.2 and 3 are responsible to the 1st accused company in the day-to-day conduct of its business. It is further submitted that SIB Ltd. got information of dishonor of payment of factoring units which were bid by the petitioners from the Union Bank of India through M1xchange, which is the system provider recognized and authorized by the Reserve Bank of India. It is submitted that M1xchange is the system provider authorized to raise Electronic Clearing Service (ECS) through National Automated Clearing House (NACH) on the date of payment and on the very same day itself the information of dishonor is uploaded by the UBI with the National Payment Corporation of India (NPCI). The date of upload of the information of dishonor is the date of dishonor of the factoring units. It is based on the above information received from the Union Bank of India that the NPCI issued information on dishonor of factoring units to M1xchange, and simultaneously, M1xchange has issued Annexure R2(d) information on dishonor of factoring units to the financing Bank. This is the process flow of the TReDS platform, which is followed by all the stakeholders who have opted to trade using the platform. It is stated that the financier Bank - the complainant herein, is bound by the provisions of the PSS Act, 2007 to issue demand notice within 30 days of intimation of dishonour received through the platform. 6. I have carefully considered the submissions and have gone through the records. 7. The issues which arise for our consideration are as follows: (i) Whether the demand notice issued under Section 25(1)(c) of the PSS Act, 2007 is in compliance with the provisions of the Act? (ii) Whether the Judicial Magistrate of the First Class-III, Ernakulam, is competent to take cognizance of the complaint? (iii) Whether a prima facie case of vicarious liability is made out against the petitioners? (iv) Whether the learned magistrate in view of Section 202 of the Cr.P.C. ought to have postponed the issue of process? (ii) Whether the Judicial Magistrate of the First Class-III, Ernakulam, is competent to take cognizance of the complaint? (iii) Whether a prima facie case of vicarious liability is made out against the petitioners? (iv) Whether the learned magistrate in view of Section 202 of the Cr.P.C. ought to have postponed the issue of process? (v) Can the petitioners be made liable under Section 138 in view of the fact that the current account maintained by the 1st accused stands attached by the GST authorities? 8. The first contention advanced by the petitioners is that there is non-compliance of Section 27(c) of the Act, 2007, as the demand for payment by the beneficiary can be made only upon the receipt of information by the complainant from the bank concerned regarding the dishonor of the electronic funds transfer, while in the instant case, the information was admittedly received from M1xchange, the service provider. 9. In this context, it would be relevant to note that the transaction in all these matters between the 1st petitioner and the 2nd respondent had taken place through the Trade Receivables Discounting System (TReDS). The TReDS is an electronic platform for facilitating the financing/discounting of trade receivables of Micro, Small, and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from Corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs). It is a platform for uploading, accepting, discounting, and settling invoices/bills of MSMEs and facilitating both receivables as well as payables factoring. The above platform was put in place by the Reserve Bank of India, taking note of the difficulties faced by MSMEs in obtaining adequate finance, particularly in terms of their ability to convert their trade receivables into liquid funds. It was in order to address the issue that was faced by MSMEs all over India that the setting up of and operating TReDS was conceptualized. For the setting up of and operating the TReDS Platform, guidelines have been issued by the Reserve Bank of India under Section 10(2) r/w. Section 18 of the Payment and Settlement Systems Act, 2007. 10. Broadly, the following steps take place during financing/discounting through TReDS: 1. For the setting up of and operating the TReDS Platform, guidelines have been issued by the Reserve Bank of India under Section 10(2) r/w. Section 18 of the Payment and Settlement Systems Act, 2007. 10. Broadly, the following steps take place during financing/discounting through TReDS: 1. Creation of a Factoring Unit (FU) - FU is a standard nomenclature used in TReDS for invoice(s) or bill(s) of exchange - containing details of invoices / bills of exchange (evidencing sale of goods / services by the MSME sellers to the buyers) on TReDS platform by the MSME seller (in case of factoring) or the buyer (in case of reverse factoring); 2. Acceptance of the FU by the counterparty - buyer or the seller, as the case may be; 3. Bidding by financiers; 4. Selection of best bid by the seller or the buyer, as the case may be; 5. Payment made by the financier (of the selected bid) to the MSME seller at the agreed rate of financing/discounting; 6. Payment by the buyer to the financier on the due date. 11. It was in the year 2015 that the Reserve Bank of India (RBI) granted in-principle approval to three companies to set up the Trade Receivable Discounting System (TReDS) platform. Mynd Solutions Pvt. Ltd. is one among the three companies that had set up the TReDS platform under the name ‘M1xchange’ under the PSS Act, 2007, to facilitate discounting of invoices and bills of exchange for MSMEs on PAN India basis. The exchange enables MSMEs to secure finances by converting their trade receivables into liquid funds on without non-recourse basis. The exchange hosts Nationalized, Private and Foreign banks to finance these receivables at competitive rates with a unique model of bidding by the banks. Financing on M1xchange is “Without Recourse” to the MSME supplier as per RBI guidelines. 12. Annexure-A3 would disclose that a master buyer agreement was entered into between the 1st petitioner- RCI Industries and Technologies Ltd. and Mynd Solutions Pvt. Ltd. to participate in the Digital marketplace and to facilitate the discounting of invoices and bills. 13. Annexure-A2 is the guidelines issued for setting up and operating TReDS. The settlement process, which is relevant for the adjudication of this petition, has been detailed in clauses 18 and 19. The same reads as under: Settlement process 18. 13. Annexure-A2 is the guidelines issued for setting up and operating TReDS. The settlement process, which is relevant for the adjudication of this petition, has been detailed in clauses 18 and 19. The same reads as under: Settlement process 18. Critical to the operations of the TReDS is the mechanism that ensures timely settlement of funds between the member financiers and the MSME sellers (when the factoring unit is financed) and the subsequent settlement of funds between the member buyers and the respective financiers on due date of the factoring unit. In order to ensure a smooth process of such payments, the TReDS would be required to: a) Trigger settlement between financier and MSME for accepted bids - In respect of all factoring units financed on a given day, the TReDS will generate the payment obligations of all financiers on T+2 basis and send the file for settlement in any of the existing payment system as agreed among the system participants. The TReDS would have to put in place a separate recourse mechanism to handle settlement failures in respective payment systems. b) Trigger settlement between the buyer and the ultimate financier on due date - the TReDS would generate the payment obligations file and send the same for settlement on due date to the relevant payment system. 19. The TReDS will generate the settlement files and send the same to existing payment systems for actual payment of funds. This would ensure that the inter-bank settlement (between the bankers representing member MSMEs, buyers and the financiers) will take place and defaults, if any, by the buyers will be handled by the buyer’s bank and will not be the responsibility of the TReDS. Hence, the settlement process ensures payments to relevant recipients on due date, thus, facilitating the smooth operations on the TReDS. However, it would not entail a guaranteed settlement by the TReDS. 20. The TReDS would be required to put in place a mechanism for bankers to report defaults in payments by buyers. The TReDS would also need to ensure adequate arbitration and grievances redressal mechanism is in place. 14. What is stated in the guidelines is that the TReDS's efficiency hinges on the procedure that guarantees prompt fund settlements between financiers and MSME sellers upon financing a factoring unit and the subsequent settlements between buyers and their financiers when due. The TReDS would also need to ensure adequate arbitration and grievances redressal mechanism is in place. 14. What is stated in the guidelines is that the TReDS's efficiency hinges on the procedure that guarantees prompt fund settlements between financiers and MSME sellers upon financing a factoring unit and the subsequent settlements between buyers and their financiers when due. To streamline these transactions, the TReDS must: a) Initiate settlements between the financier and MSME for endorsed bids. The TReDS, for every factoring unit financed daily, will create payment obligations for financiers on a T+2 basis and submit this for settlement in a predetermined payment system. Additionally, the TReDS will establish a distinct recourse strategy for any settlement failures within these payment systems. b) Facilitate settlements between the buyer and the final financier on the stipulated due date, by generating and dispatching the payment obligation files to the appropriate payment system. The TReDS will produce settlement files and dispatch them to current payment systems to ensure funds are transferred. This guarantees that inter-bank settlements (involving the banks representing MSMEs, buyers, and financiers) occur. This settlement process ensures timely payments to all pertinent parties, aiding in the seamless operation of the TReDS. The TReDS is also required to implement a system allowing banks to report payment defaults by buyers. 15. In the instant case, it can be seen that the South Indian Bank entered into a Master Financier Agreement with M/s. Mynd Solutions Pvt. Ltd., which hosts a TReDS platform under the name M1xchange. This platform is hosted with the approval of the RBI on the strength of the powers conferred under Section 10(2) r/w. Section 18 of the Payment and Settlement Systems Act, 2007. The petitioners also had executed Annexure-A3 Master Buyer Agreement with M/s. Mynd Solutions Pvt. Ltd., wherein they had undertaken the prompt repayment of the amounts received towards Trade Receivables Discounting/Factoring Facilities. It is in furtherance to Annexure-A3 agreement that the petitioners had opted for the National Automated Clearing House (NACH) mandate. It would be relevant to note that the National Automated Clearing House is a centralized electronic payment service for banks, corporates, financial institutions, and the Government which was set up by the National Payment Corporation of India (NPCI) to introduce best practices in electronic transactions. The 1st petitioner has issued standing instructions to the Union Bank of India for a maximum amount of Rs. The 1st petitioner has issued standing instructions to the Union Bank of India for a maximum amount of Rs. 100 lakhs (with payment frequency “as and when presented”) towards the discharge of liability in respect of the facility. The records disclosed that the M1xchange had also entered into a Master Supplier Agreement with the supplies of goods to the petitioners so as to avail Trade Receivables Discounting/Factoring Facilities as per the TReDS guidelines. The suppliers supplied goods to the petitioners’ company. To pay the amount covered under the invoices raised by those players, the 2nd Respondent bank had discounted/factored the factoring units through the M1xchange. 16. What transpires thereafter would be evident from Clause 4.3.3 of Annexure A3 Master Buyer agreement entered into between the 1st petitioner and M1Xchange. Clause 4.3.3. Reads as under 4.3.3. Assignment: Once a Bid is accepted by Supplier/Buyer (as the case may be) in accordance with the Procedural Guidelines. the Supplier shall execute a Deed of Assignment generated on the M1 Website by affixing its digital signature which shall be deemed to be executed by the Supplier. The Buyer acknowledges and unconditionally agrees that upon the execution of the Deed of Assignment by the Supplier, all the Trade Receivables underlying such factoring unit shall shall without any further act, instrument or deed stand assigned, transferred or sold by the Supplier to the financier and, thereupon the Financier shall be deemed be the full and absolute legal owner and beneficial owner of the relevant Trade Receivables free from any or all encumbrances and as such the Financier shail be the only person legally entitled to recover the Trade Receivables underlying the discounted Factoring Unit or have the right to file a suit or institute such other proceedings as may be required for the purpose of recovery of such Trade Receivables i its own name and right and as assignee/purchaser and not as representative or agent of the Supplier. Further, an intimation ("Notice of Assignment") shall be sent by M1 website to the Buyer in the form as prescribed by the Company with regard to the execution of the Deed of Assignment. The Notice of Assignment shall confer the right on a Financier to demand payment of the amount underlying the Trade Receivables from the Buyer. Further, an intimation ("Notice of Assignment") shall be sent by M1 website to the Buyer in the form as prescribed by the Company with regard to the execution of the Deed of Assignment. The Notice of Assignment shall confer the right on a Financier to demand payment of the amount underlying the Trade Receivables from the Buyer. For the avoidance of doubt any legal proceedings to be initiated by any party to a Transaction against another party to such transaction, if at all, will be outside the purview of the M1 website 17. It is evident from Annexure-A3 master buyer agreement entered into between the 1st Petitioner and M1xchange that once the bid is accepted by the supplier/buyer, the supplier shall execute a deed of assignment generated on the M1xchange platform by affixing the digital signature. On execution of the signature, all the trade receivables covered under such factoring unit shall stand assigned, transferred or sold by the supplier to the financial year. Thereupon, the financier is deemed to be the full and absolute beneficial owner of the relevant trade receivables, free from all encumbrances. The financier shall be the only person who is legally entitled to recover the trade receivables covered under the discounted factoring unit. 18. The petitioners, having opted for the National Automated Clearing House mandate and after having entered into Annexure-A3 agreement with M1xchange, carried out the entire transaction through the TReDS platform. Right from the Creation of a Factoring Unit by the supplier, the acceptance of the Factoring Unit by the petitioner, Bidding by financiers, the selection of the best bid by the seller or the buyer, the payment made by the financier to the MSME seller were all transacted through the platform. The Payment to the petitioner was also to be made through the platform itself. The 2nd respondent Bank will get information of dishonor of payment of factoring units which were bid by the petitioners from the Union Bank of India only through the M1xchange portal, which is authorized by the RBI to raise Electronic Clearing Service (ECS) through National Automated Clearing House (NACH) on the date of payment. On the very same day itself, the information of dishonor is uploaded by the UBI with the National Payment Corporation of India (NPCI). The date of upload of the information of dishonor is the date of dishonor of the factoring units. On the very same day itself, the information of dishonor is uploaded by the UBI with the National Payment Corporation of India (NPCI). The date of upload of the information of dishonor is the date of dishonor of the factoring units. It is based on the above information received from the Union Bank of India that the NPCI issued information on dishonor of factoring units to M1xchange, and simultaneously, M1xchange has issued Annexure-R2(d) information on dishonor of Factoring Units to the financing Bank. 19. In this context, it would be profitable to peruse the vision document brought out by the Reserve Bank of India on 15.5.2019 titled the Payment and Settlement Systems in India- Vision Document 2019 -2012 which is available in the link https://m.rbi.org.in/Scripts/PublicationVisionDocuments.aspx?Id=92. In the foreword to the vision document, it has been stated as under: 1. FOREWORD 1.1 Payment and settlement systems are the backbone of any economy. The last decade has witnessed substantial developments in this area of activity across the country. The Reserve Bank of India (RBI), under powers from the Payment and Settlement Systems Act, 2007, has endeavoured to ensure that India has ‘state-of-the-art’ payment and settlement systems that are not just safe and secure, but are also efficient, fast and affordable. Efforts in this direction has yielded handsome results. The planned development of the payment systems has been guided by RBI’s vision document for the payment and settlement systems in India which is being put out in the public domain since the year 2002; the last in this series was the Payment Systems Vision 2018. The current Vision document outlines the road map for the three-year period spanning from 2019 to 2021. 1.2 Some of the positive outcomes of the developments during the period 2015-2018 include ushering introduction of new and innovative systems, distinctive shift from paper to electronic payment modes, sizeable increase in transaction turnover, customer centric initiatives, international recognition, etc. Growth in electronic payments has been substantial with retail payments reflecting large growth in volume terms, while the Systemically Important Financial Market Infrastructures (SIFMIs), such as the Real Time Gross Settlement (RTGS) system and Financial Markets Clearing through Clearing Corporation of India Ltd. (CCIL), dominate in value term 20. Growth in electronic payments has been substantial with retail payments reflecting large growth in volume terms, while the Systemically Important Financial Market Infrastructures (SIFMIs), such as the Real Time Gross Settlement (RTGS) system and Financial Markets Clearing through Clearing Corporation of India Ltd. (CCIL), dominate in value term 20. It is in order to ensure that India has ‘state-of-the-art’ payment and settlement systems that are safe, secure, efficient, fast, and affordable that all these functionalities and innovative systems have been put in place. Given that the petitioner chose to transact via the TReDS platform and subsequently entered an agreement with the M1xchange, they are precluded from contending that the 2nd respondent is entitled to issue a notice under Section 27(c) of the Act only upon receipt of a dishonor memo from the Union Bank of India. According to the agreement entered between the supplier, buyer, and the respective Banks with the M1xchange, the system provider initiates the Electronic Clearance Service (ECS) to the buyer's Bank via the National Automated Clearing House (NACH) on the specified due date. The petitioner/s Bank then electronically conveys relevant information back to the initiating system provider. Any instance of dishonor is reflected on the NACH portal, and simultaneously, the dishonoring Bank transmits this information to the NPCI. Given that this dishonor process is automated, the petitioner's assertion that there is a violation of section 27(c), and violation is untenable. The phrasing "receipt of information from the Bank concerned" within Section 27(c) cannot be interpreted narrowly. The provision merely necessitates information receipt from the relevant Bank. In the context of transactions conducted via TReDS on a platform, the petitioner, who has volunteered to be a participant, cannot be heard to contend that notices of dishonor can only be issued based on direct intimation from the Bank. I am of the view that "receipt of information from the Bank" encompasses data received through electronic portals wherein all stakeholders participate. Moreover, a perusal of Section 27(4) of the Act 2009 reveals that a presumption of dishonor for electronic funds transfer arises in proceedings only upon presenting a communication from the bank indicating such dishonor. The 2nd respondent can avail the benefit of presumption by furnishing the requisite communication from the Bank denoting the electronic funds transfer's dishonor. Moreover, a perusal of Section 27(4) of the Act 2009 reveals that a presumption of dishonor for electronic funds transfer arises in proceedings only upon presenting a communication from the bank indicating such dishonor. The 2nd respondent can avail the benefit of presumption by furnishing the requisite communication from the Bank denoting the electronic funds transfer's dishonor. In other words, to issue the demand under Section 27(1)(c) of the Act before lodging the complaint, the only requirement is that the information has to originate from the bank concerned and reach the complainant through the platform. However, if the complainant wants to avail the benefit of the presumption, they will have to produce a communication from the bank denoting the dishonor of the electronic fund transfer. In that view of the matter, I hold that the contention of the petitioners that the complaint is liable to be quashed for violation of the provisions of Section 27(1)(c) cannot be sustained. 21. The next contention advanced by the learned Senior counsel is with regard to the alleged failure of the learned Magistrate to conduct an enquiry as contemplated under Section 202 of the Code of Criminal Procedure. The petitioners have not produced the order issuing process to the accused. In the objection filed by the 2nd respondent, it is stated that the learned magistrate had conducted an enquiry as contemplated under Section 202 of the Code of Criminal Procedure. While issuing process, the learned magistrate had passed the following order: Perused the complaint, documents and affidavit. Complainant has made out a prima facie case. Hence, complaint is taken on file as ST 101 u/s. 25 of the Payment and Settlement Systems Act, 2007, and made over to the Judicial I Class Magistrate Court -III, Ernakulam. Parties are directed to appear before the court on 9.12.2019. 22. In Sunil Todi and Ors v. State of Gujarat and Another, (2021) SCC OnLine SC 1174, the Apex Court was moved by the accused in a 138 proceeding challenging the order issuing process by the learned magistrate. One of the contentions was whether the learned magistrate in view of Section 202 of the Cr.P.C., ought to have postponed the issue of process. The Apex Court, while answering the issue, held as under in paragraph No. 36 to 48 of the judgment. The relevant paragraphs are extracted below: 36. One of the contentions was whether the learned magistrate in view of Section 202 of the Cr.P.C., ought to have postponed the issue of process. The Apex Court, while answering the issue, held as under in paragraph No. 36 to 48 of the judgment. The relevant paragraphs are extracted below: 36. The second submission which has been urged on behalf of the appellants turns upon Section 202 CrPC, which is extracted: xxxx xxxxx xxxx xxxxx 45. In this backdrop, it becomes necessary now to advert to an order dated 16 April 2021 of a Constitution Bench in Re : Expeditious Trial of Cases under Section 138 of N.I. Act 188126. The Constitution Bench notes “the gargantuan pendency of complaints filed under Section 138” and the fact that the “situation has not improved as courts continue to struggle with the humongous pendency”. The court noted that there were seven major issues which arose from the responses filed by the State Governments and the Union Territories including in relation to the applicability of Section 202 of the CrPC. Section 143 of the NI Act provides that Sections 262 to 265 of the CrPC (forming a part of Chapter XXI dealing with summary trials) shall apply to all trials for offences punishable under Section 138 of the NI Act. On the scope of the inquiry under Section 202 CrPC in cases under Section 138 of the NI Act, there was a divergence of view between the High Courts. Some High Courts had held that it was mandatory for the Magistrate to conduct an inquiry under Section 202 CrPC before issuing process in complaints filed under Section 138, while there were contrary views in the other High Courts. In that context, the Court observed: “10. Section 202 of the Code confers jurisdiction on the Magistrate to conduct an inquiry for the purpose of deciding whether sufficient grounds justifying the issue of process are made out. The amendment to Section 202 of the Code with effect from 23.06.2006, vide Act 25 of 2005, made it mandatory for the Magistrate to conduct an inquiry before issue of process, in a case where the accused resides beyond the area of jurisdiction of the court. (See : Vijay Dhanuka v. Najima Mamtaj1, Abhijit Pawar v. Hemant Madhukar Nimbalkar and Birla Corporation Limited v. Adventz Investments and Holdings Limited). (See : Vijay Dhanuka v. Najima Mamtaj1, Abhijit Pawar v. Hemant Madhukar Nimbalkar and Birla Corporation Limited v. Adventz Investments and Holdings Limited). There has been a divergence of opinion amongst the High Courts relating to the applicability of Section 202 in respect of complaints filed under Section 138 of the Act. Certain cases under Section 138 have been decided by the High Courts upholding the view that it is mandatory for the Magistrate to conduct an inquiry, as provided in Section 202 of the Code, before issuance of process in complaints filed under Section 138. Contrary views have been expressed in some other cases. It has been held that merely because the accused is residing outside the jurisdiction of the court, it is not necessary for the Magistrate to postpone the issuance of process in each and every case. Further, it has also been held that not conducting inquiry under Section 202 of the Code would not vitiate the issuance of process, if requisite satisfaction can be obtained from materials available on record. 11. The learned Amici Curiae referred to a judgment of this Court in K.S. Joseph v. Philips Carbon Black Ltd. where there was a discussion about the requirement of inquiry under Section 202 of the Code in relation to complaints filed under Section 138 but the question of law was left open. In view of the judgments of this Court in Vijay Dhanuka (supra), Abhijit Pawar (supra) and Birla Corporation (supra), the inquiry to be held by the Magistrate before issuance of summons to the accused residing outside the jurisdiction of the court cannot be dispensed with. The learned Amici Curiae recommended that the Magistrate should come to a conclusion after holding an inquiry that there are sufficient grounds to proceed against the accused. We are in agreement with the learned Amici.” 46. Section 145 of the NI Act provides that evidence of the complainant may be given by him on affidavit, which shall be read in evidence in an inquiry, trial or other proceeding notwithstanding anything contained in the CrPC. The Constitution Bench held that Section 145 has been inserted in the Act, with effect from 2003 with the laudable object of speeding up trials in complaints filed under Section 138. The Constitution Bench held that Section 145 has been inserted in the Act, with effect from 2003 with the laudable object of speeding up trials in complaints filed under Section 138. Hence, the Court noted that if the evidence of the complainant may be given by him on affidavit, there is no reason for insisting on the evidence of the witnesses to be taken on oath. Consequently, it was held that Section 202(2) CrPC is inapplicable to complaints under Section 138 in respect of the examination of witnesses on oath. The Court held that the evidence of witnesses on behalf of the complainant shall be permitted on affidavit. If the Magistrate holds an inquiry himself, it is not compulsory that he should examine witnesses and in suitable cases the Magistrate can examine documents to be satisfied that there are sufficient grounds for proceeding under Section 202. 47. In the present case, the Magistrate has adverted to: (i) The complaint; (ii) The affidavit filed by the complainant; (iii) The evidence as per evidence list and; and (iv) The submissions of the complainant. 48. The order passed by the Magistrate cannot be held to be invalid as betraying a non-application of mind. In Dy. Chief Controller of Imports & Exports v. Roshanlal Agarwal [ (2003) 4 SCC 139 ], this Court has held that in determining the question as to whether process is to be issued, the Magistrate has to be satisfied whether there is sufficient ground for proceeding and not whether there is sufficient ground for conviction. Whether the evidence is adequate for supporting the conviction can only be determined at the trial. 23. In the case on hand, the records discloses that the learned magistrate has acted in terms of the directions issued by the Apex Court. He has perused the complaint and the affidavit filed by the complainant and found out that a prima facie case was made out. In that view of the matter, going by the observations in Sunil Todi (supra), it cannot be said that the order issuing process is without proper application of mind. 24. The next contention is that the averment in the complaint is deficient to prosecute the petitioners 2 and 3 on the principle of vicarious liability. The very same question was considered by the Apex Court in Sunil Todi (supra) while interpreting Section 141 of the Negotiable Instruments Act. 24. The next contention is that the averment in the complaint is deficient to prosecute the petitioners 2 and 3 on the principle of vicarious liability. The very same question was considered by the Apex Court in Sunil Todi (supra) while interpreting Section 141 of the Negotiable Instruments Act. After exhaustively considering all the past precedents, it was held by the Apex Court that the determination of whether the conditions stipulated in 141 of the Act has been fulfilled or not is a matter of trial. Paragraph Nos. 50 to 53 is relevant in this context: 50. Section 141 of the NI Act stipulates that if a company is alleged to have committed an offence under Section 138, then every person who ‘was in charge of, and responsible to, the company for the conduct of the business of the company’ shall also be deemed guilty of the offence. The proviso provides an exception if she proves that the offence was committed without her knowledge or that she had exercised due diligence. In Sunil Bharati Mittal v. CBI [ (2015) 4 SCC 609 ], a three judge Bench of this Court observed that the general rule is that criminal intent of a group of people who undertake business can be imputed to the Company but not the other way around. Only two exceptions were provided to this general rule : (i) when the individual has perpetuated the commission of offence and there is sufficient evidence on the active role of the individual; and (ii) the statute expressly incorporates the principle of vicarious liability. Justice Sikri writing for a three-judge Bench observed: “43. Thus, an individual who has perpetrated the commission of an offence on behalf of a company can be made an accused, along with the company, if there is sufficient evidence of his active role coupled with criminal intent. Second situation in which he can be implicated is in those cases where the statutory regime itself attracts the doctrine of vicarious liability, by specifically incorporating such a provision. 44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. 44. When the company is the offender, vicarious liability of the Directors cannot be imputed automatically, in the absence of any statutory provision to this effect. One such example is Section 141 of the Negotiable Instruments Act, 1881. In Aneeta Hada [Aneeta Hada v. Godfather Travels & Tours (P) Ltd., (2012) 5 SCC 661 ], the Court noted that if a group of persons that guide the business of the company have the criminal intent, that would be imputed to the body corporate and it is in this backdrop, Section 141 of the Negotiable Instruments Act has to be understood. Such a position is, therefore, because of statutory intendment making it a deeming fiction. Here also, the principle of “alter ego”, was applied only in one direction, namely, where a group of persons that guide the business had criminal intent, that is to be imputed to the body corporate and not the vice versa. Otherwise, there has to be a specific act attributed to the Director or any other person allegedly in control and management of the company, to the effect that such a person was responsible for the acts committed by or on behalf of the company.” 51. In SMS Pharmaceuticals v. Neeta Bhalla[ (2005) 8 SCC 89 ], a three judge Bench while construing the provisions of Section 141 of the Negotiable Instruments Act 1881, has noted that the position of a Managing Director or a Joint Managing Director of a company is distinct since persons occupying that position are in charge of and responsible for the conduct of the business. It was observed that though there is a general presumption that the Managing Director and Joint Managing Director are responsible for the criminal act of the company, the director will not be held liable if he was not responsible for the conduct of the company at the time of the commission of the offence. The Court observed: “9. The position of a managing director or a joint managing director in a company may be different. These persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. The Court observed: “9. The position of a managing director or a joint managing director in a company may be different. These persons, as the designation of their office suggests, are in charge of a company and are responsible for the conduct of the business of the company. In order to escape liability such persons may have to bring their case within the proviso to Section 141(1), that is, they will have to prove that when the offence was committed they had no knowledge of the offence or that they exercised all due diligence to prevent the commission of the offence. […] Every person connected with the company shall not fall within the ambit of the provision. It is only those persons who were in charge of and responsible for the conduct of business of the company at the time of commission of an offence, who will be liable for criminal action. It follows from this that if a director of a company who was not in charge of and was not responsible for the conduct of the business of the company at the relevant time, will not be liable under the provision. The liability arises from being in charge of and responsible for the conduct of business of the company at the relevant time when the offence was committed and not on the basis of merely holding a designation or office in a company. Conversely, a person not holding any office or designation in a company may be liable if he satisfies the main requirement of being in charge of and responsible for the conduct of business of a company at the relevant time.” (emphasis supplied) 52. The same principle has been followed by a Bench of two judges in Mainuddin Abdul Sattar Shaikh v. Vijay D Salvi: “12. The respondent has adduced the argument that in the complaint the appellant has not taken the averment that the accused was the person in charge of and responsible for the affairs of the Company. However, as the respondent was the Managing Director of M/s Salvi Infrastructure (P) Ltd. and sole proprietor of M/s Salvi Builders and Developers, there is no need of specific averment on the point. This Court has held in National Small Industries Corpn. However, as the respondent was the Managing Director of M/s Salvi Infrastructure (P) Ltd. and sole proprietor of M/s Salvi Builders and Developers, there is no need of specific averment on the point. This Court has held in National Small Industries Corpn. Ltd. v. Harmeet Singh Paintal [ (2010) 3 SCC 330 ], as follows : “39.(v.) If the accused is a Managing Director or a Joint Managing Director then it is not necessary to make specific averment in the complaint and by virtue of their position they are liable to be proceeded with.” 53. The test to determine if the Managing Director or a Director must be charged for the offence committed by the Company is to determine if the conditions in Section 141 of the NI Act have been fulfilled i.e., whether the individual was in-charge of and responsible for the affairs of the company during the commission of the offence. However, the determination of whether the conditions stipulated in Section 141 of the MMDR Act have been fulfilled is a matter of trial. There are sufficient averments in the complaint to raise a prima facie case against them. It is only at the trial that they could take recourse to the proviso to Section 141 and not at the stage of issuance of process. 25. In that view of the matter, the contention of the petitioner that the proceedings against the petitioners 2 and 3 are to be quashed for want of averments in the complaint cannot be sustained. 26. The next contention is that only the courts in Delhi would have jurisdiction to try the offence. It has to be immediately noticed that the above contention is based on Annexure-3 agreement entered into between the 1st petitioner and Mynd Solutions Pvt. Ltd. As rightly submitted by the learned counsel appearing for the 2nd respondent, the said agreement was executed between the 1st petitioner and M1xchange to govern the terms of Annexure-A3 agreement. In the case on hand, the proceedings were initiated against the petitioners under the relevant provisions of the PSS Act, 2007, on account of the dishonor of electronic fund transfer. As the Electronic Fund Transfer took place in the account of the 2nd respondent at Ernakulam within the jurisdiction of the learned magistrate, the complaint has been lodged at the appropriate forum. 26. As the Electronic Fund Transfer took place in the account of the 2nd respondent at Ernakulam within the jurisdiction of the learned magistrate, the complaint has been lodged at the appropriate forum. 26. The next contention is that in view of the attachment order issued by the GST Authorities, the petitioners herein cannot be made liable under the PSS Act, 2007. It is the contention of the petitioners that their Bank account was attached by the GST authorities from 22.7.2019, and it was only on 17.08.2019 that the complainant had initiated the Electronic Clearance Services. As far as the instant case is concerned, the only issue for consideration is whether the Electronic Clearance Service raised to realize the amounts covered under the Factoring Units were dishonored. Admittedly, the reason for dishonor is “Balance insufficient”. In that view of the matter, the contention of the petitioner that the complaint filed by the 2nd respondent is liable to be quashed and cannot be sustained. It is for the petitioners to raise all their contentions touching factual matters before the learned Magistrate as held in Sunil Todi (Supra). These petitions are dismissed.